BILL NUMBER: AB 784	CHAPTERED  10/10/99

	CHAPTER   993
	FILED WITH SECRETARY OF STATE   OCTOBER 10, 1999
	APPROVED BY GOVERNOR   OCTOBER 10, 1999
	PASSED THE ASSEMBLY   SEPTEMBER 9, 1999
	PASSED THE SENATE   SEPTEMBER 8, 1999
	AMENDED IN SENATE   SEPTEMBER 3, 1999
	AMENDED IN SENATE   AUGUST 16, 1999
	AMENDED IN SENATE   JUNE 24, 1999
	AMENDED IN ASSEMBLY   MAY 25, 1999
	AMENDED IN ASSEMBLY   APRIL 19, 1999
	AMENDED IN ASSEMBLY   APRIL 5, 1999

INTRODUCED BY   Assembly Member Romero
   (Coauthors:  Assembly Members Aroner, Davis, Firebaugh, Honda,
Jackson, Knox, Longville, and Mazzoni)
   (Coauthor:  Senator Speier)

                        FEBRUARY 24, 1999

   An act to amend Sections 14170.8 and 14171.6 of, and to add
Section 14100.75 to, the Welfare and Institutions Code, relating to
Medi-Cal.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 784, Romero.  Medi-Cal.
   Existing law provides for the Medi-Cal program, which is
administered by the State Department of Health Services, pursuant to
which medical benefits are provided to public assistance recipients
and certain other low-income persons.
   Existing law specifies that any Medi-Cal provider of durable
medical equipment or incontinence supplies shall provide to the
department a bond of not less than $25,000, but authorizes the
provider to seek an exemption from that requirement after continuous
operation of 3 years.
   This bill would extend those requirements to other providers under
the Medi-Cal program, and would require the department to establish
a mechanism to track participation rates to determine if the
requirement is a deterrent to Medi-Cal program participation.
   Existing law provides that principal labelers and other primary
suppliers of goods and services to incontinence supplies providers
under the Medi-Cal program maintain accounting records to support the
cost of goods and services provided to those providers, subject to
audit or examination by the department.
   This bill would extend that requirement to primary Medi-Cal
suppliers, as defined, of equipment and supplies to all providers
under the Medi-Cal program.
   Existing law requires the Director of Health Services to establish
administrative appeal processes to review grievances or complaints
arising from the findings of an audit or examination for final
settlements.
   This bill would revise those procedures to require that collection
of overpayments subject to a notice of deficiency by the department
shall not be deferred although the provider has submitted a request
for an appeal process, if the department determines that fraud or
willful misrepresentation was applied in the provision of the goods
or services, until the completion of the appeal process except in
certain cases of extreme financial hardship.
   Existing law requires that a provider of durable medical equipment
or incontinence supplies under the Medi-Cal program shall be subject
to certain penalties and interest on reimbursements received under
the Medi-Cal program to which the provider is not entitled.
   This bill would extend those penalty and interest requirements to
also apply to any provider of services, as defined.
   This bill would exempt certain primary care clinics from all the
provisions of the bill.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 14100.75 is added to the Welfare and
Institutions Code, to read:
   14100.75.  (a) (1) Any provider of goods or services shall
provide, to the department, a bond, or other security satisfactory to
the department, of an amount determined by the department, pursuant
to regulations adopted by the department.
   (2) The department, in determining the amount of bond or security
required by paragraph (1), shall base the determination on the level
of estimated billings, and shall not be less than twenty-five
thousand dollars ($25,000).
   (b) (1) After three years of continuous operation as a provider, a
Medi-Cal provider may apply to the department for an exemption from
the requirements of subdivision (a).
   (2) The department shall adopt regulations establishing conditions
for the approval or denial of applications for exemption pursuant to
paragraph (1).
   (c) The department shall establish a mechanism to track rates of
participation among providers who are subject to the requirement of
subdivision (a) to determine if the requirement is a deterrent to
Medi-Cal program participation among provider applicants.
   (d) Subdivisions (a) and (b) do not apply to individuals who are
licensed pursuant to Division 2 (commencing with Section 500) of the
Business and Professions Code, to any clinic licensed pursuant to
subdivision (a) of Section 1204 of the Health and Safety Code, to any
health facility licensed pursuant to Section 1250 of the Health and
Safety Code, or to any provider that is operated by a city, county,
school district, county office of education, or state special school.

  SEC. 2.  Section 14170.8 of the Welfare and Institutions Code is
amended to read:
   14170.8.  (a) Notwithstanding any other provision of law, every
primary supplier of pharmaceuticals or medical equipment and supplies
shall maintain accounting records to demonstrate the manufacture,
assembly, purchase, or acquisition and subsequent sale, of any
pharmaceuticals or medical equipment and supplies to Medi-Cal
providers.  Accounting records shall include, but not be limited to,
inventory records, general ledgers, financial statements, purchase
and sales journals and invoices, prescription records, bills of
lading, and delivery records.  For purposes of this section the term
"primary suppliers" shall mean any manufacturer, principal labeler,
wholesaler, and any other primary supplier.
   (b) Accounting records maintained pursuant to subdivision (a)
shall be subject to audit or examination by the department or the
Controller during regular business hours.  These accounting records
shall be maintained for three years from the date of sale or the date
of service.
   (c) This section shall not apply to any clinic licensed pursuant
to subdivision (a) of Section 1204 of the Health and Safety Code or
to any manufacturer of prescription drugs registered with the federal
Food and Drug Administration in accordance with Section 510 of the
Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 360).
  SEC. 3.  Section 14171.6 of the Welfare and Institutions Code is
amended to read:
   14171.6.  (a) (1) Any provider, as defined in paragraph (3), that
obtains reimbursement under this chapter to which it is not entitled
shall be subject to interest charges or penalties as specified in
this section.
   (2) When it is established upon audit that the provider has not
received reimbursement to which it is entitled, the department shall
pay the provider interest assessed at the rate, and in the manner,
specified in subdivision (h) of Section 14171.
   (3) For purposes of this section, "provider" means any provider of
services, as defined in subdivision (a) of Section 51051 of Title 22
of the California Code of Regulations.
   (b) When it is established upon audit that the provider has
claimed payments under this chapter to which it is not entitled, the
provider shall pay, in addition to the amount improperly received,
interest at the rate specified by subdivision (h) of Section 14171.
   (c) (1) When it is established upon audit that the provider
claimed payments related to services or costs that the department had
previously notified the provider in an audit report that the costs
or services were not reimbursable, the provider shall pay, in
addition to the amount improperly claimed, a penalty of 10 percent of
the amount improperly claimed after receipt of the notice, plus the
cost of the audit.
   (2) In addition to the penalty and costs specified by paragraph
(1), interest shall be assessed at the rate specified in subdivision
(h) of Section 14171.
   (3) Providers that wish to preserve appeal rights or to challenge
the department's positions regarding appeal issues may claim the
costs or services and not be reimbursed therefor if they are
identified and presented separately on the cost report.
   (d) (1) When it is adjudicated that the provider fraudulently
claimed and received payments under this chapter, the provider shall
pay, in addition to that portion of the claim that was improperly
claimed, a penalty of 300 percent of the amount improperly claimed,
plus the cost of the audit.
   (2) In addition to the penalty and costs specified by paragraph
(1), interest shall be assessed at the rate specified by subdivision
(h) of Section 14171.
   (3) For purposes of this subdivision, a fraudulent claim is a
claim upon which the provider has been convicted of fraud upon the
Medi-Cal program.
   (e) Nothing in this section shall prevent the imposition of any
other civil or criminal penalties to which the provider may be
liable.
   (f) Any appeal to any action taken pursuant to subdivision (b),
(c), or (d) is subject to the administrative appeals process provided
by Section 14171.
   (g) As used in this section, "cost of the audit" includes actual
hourly wages, travel, and incidental expenses at rates allowable by
rules adopted by the State Board of Control and applicable overhead
costs that are incurred by employees of the state in administering
this chapter with respect to the performance of audits.
   (h) This section shall not apply to any clinic licensed pursuant
to subdivision (a) of Section 1204 of the Health and Safety Code.
